Liberum ups IAG price target, reiterates ‘buy’ after results

Liberum lifted its price target on BA and Iberia owner IAG on Tuesday following recent annual results.

The broker upped its price target to 240p from 220p and reiterated its ‘buy’ rating on the shares.

"Our forecasts remain at the top end of management’s profit guidance range for the current year," Liberum said. "This reflects our optimism that economic activity, and hence air travel demand, will remain ahead of airline industry capacity relative to pre-pandemic levels."

The broker now expects 2023 revenues of €28.8bn, up from a previous forecast of €26.1bn.

"GDP, and economic activity more generally, recovered relatively quickly from the impact of the pandemic. In contrast, air travel lagged significantly, despite being a derived demand," Liberum noted.

"This reflected the widespread imposition of onerous international travel restrictions, up to outright travel bans in some cases. These restrictions have been lifted, but although capacity restoration was rapid last year, it has continued to lag pre-pandemic levels."

Liberum said it perceives a gap between economic activity and airline industry capacity relative to pre-pandemic levels, even if there is an economic slowdown.

"In our view, this implies headroom for the air travel recovery to continue, with positive pricing trends maintained, underpinned by capacity lagging both 2019 levels and the levels that would are implied by economic activity levels."